Banks that surrender customer files after receiving oral requests from federal authorities are vulnerable to lawsuits, a U.S. appeals court judge has ruled.
In a decision that consolidated two separate cases, Judge Edward E. Carnes of the U.S. Court of Appeals for the 11th Circuit ruled last month that bank customers may sue First Union National Bank of Florida and BankAtlantic Bancorp. for divulging to investigators information about their accounts.
In the First Union case, customer Patricia Lopez alleged that the bank should not have released her files because the government failed to issue a written subpoena.
In 1995 BankAtlantic gave investigators access to 1,100 accounts without receiving a subpoena. One of the account holders, Jose Ruiz Coronado, sued the Fort Lauderdale, Fla., thrift, charging that it wrongly disclosed his files.
To encourage banks to cooperate with money laundering investigations, Congress in 1992 created a safe harbor from customer lawsuits. However, the law included specific criteria that, if not followed, expose banks to the possibility of being sued by customers.
"If a bank is going to give up information based on oral instructions, they are not going to, nor should they, get the safe harbor," said John J. Byrne, senior counsel and compliance manager for the American Bankers Association.